Exchange rate pass-through, exchange rate disconnect and exchange rate regimes

Theodoros Stamatopoulos () and Harilaos Harissis

Applied Economics Letters, 2010, vol. 17, issue 7, 717-722

Abstract: This article investigates the degree of Exchange Rate Pass-Through (ERPT) into import prices for the Hellenic economy, during its post-Bretton Woods and pre-European Monetary Union (pre-EMU) era 1975-1998. Using multivariate cointegration techniques, we provide empirical evidence for complete long-run and incomplete short-run ERPT coefficients. The pattern of trade, which reflects the production pattern as well as intervention policies, appearing from the country's course towards EMU, justifies these estimations. Complete ERPT and estimated disconnection of the exchange rate of the Hellenic Drachmae from the real industrial production may be accepted as an argument in favour of joining the euro, within a single criterion of Optimum Currency Areas' theory.

Date: 2010
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DOI: 10.1080/17446540802298050

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